Have you received a tax letter yet?
After an initial pilot mail, Revenue and Customs (HMRC) are now beginning to send out mass mailings relating to the tax mistakes that will leave 1.4 million individuals facing a bill for underpaid tax.
With hundreds of thousands of people set to receive a letter informing them that they have underpaid tax for two years, HMRC and tax organisations are bracing themselves for a deluge of calls from people concerned about their tax.
Challenging the tax mistakes
As yet, no-one knows quite how many people are likely to challenge the demand for extra tax. However, it was recently reported in the Independent that the charity Tax Help for Older People expects to appeal in a staggering 95 per cent of cases.
Chief executive Paddy Millard says: “In probably the overwhelming majority of cases, it’s not going to be their [the charity’s clients’] fault.”
If a large number of the 1.4 million people affected do appeal, it could take months for HMRC to rule on the cases. The Independent reports that HMRC does not have any special help lines and that the Adjudicator’s Office, an ombudsman-like complaints-handling service for people who are unsatisfied with the way HMRC has managed a complaint, has struggled in the past to deal with just 1,800 cases a year. Even now it can take up to six months to resolve a complaint.
A spokesperson said: “We are aware of the issue but I can’t say we are gearing up for it.”
Tax mistakes won’t lead to additional benefits
One of the main issues that has been thrown up by these blunders is that many people on low incomes could have claimed more means-tested benefits over the last two years if they had known they would have to pay more tax. The Low Income Tax Reform Group (LITRG) chairman Jon Andrews said: “For instance, there are cases in which, if someone had known they had to pay £5 a week more in tax, they could have got more Pension Credit, Housing Benefit or Council Tax Benefit.”
However, it has been decided these people will not be able to claim their benefits retrospectively into the 2008/09 and 2009/10 fiscal years. LITRG are still trying to thrash out a compromise on this issue.
Seeking specialist tax advice could be hard
The Low Income Tax Reform Group is one of the very few organisations with the tax knowledge needed to help people who want to question their HMRC demand. The websites of the Citizen’s Advice Bureau, charity TaxAid, LITRG and Tax Help for Older People will be the best way for many people to work out what they need to do. However, these small organisations are mainly staffed by volunteers, and are likely to struggle to cope with the demand from concerned taxpayers. Many of them also only work with people on low incomes.
So, if you want to question whether you have paid too much or too little tax, it could well be worth seeking the advice of a tax specialist. All the 5.7 million people who have either paid too little or too much tax should be notified before the end of 2010. However, the appeals process could run for years.